Symbolics Bancruptcy Filed

Proc-Type: 2001,MIC-CLEAR

0000922409-96-000035.txt : 19960629
0000922409-96-000035.hdr.sgml : 19960629

ACCESSION NUMBER: 0000922409-96-000035
ITEM INFORMATION: Acquisition or disposition of assets
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 19960627


IRS NUMBER: 953548781

SEC ACT: 1934 Act
SEC FILE NUMBER: 000-13412
FILM NUMBER: 96586478

ZIP: 91311
BUSINESS PHONE: 8189983600

ZIP: 91311


Washington, D.C. 20549


Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): May 7, 1996

Symbolics, Inc.

(Exact name of registrant as specified in its charter)

(State of incorporation or organization)

0-13412 95-3548781
(Commission File Number) (I.R.S. Employer Identification No.)

9000 Fulbright Avenue, Chatsworth, California 91311

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (818) 998-3600

PAGE 1 of 21 PAGES

Item 2. Acquisition or Disposition of Assets.

(a) On May 7, 1996, the Chapter 11 bankruptcy
case of Symbolics, Inc., a Delaware corporation and the debtor-
in-possession, Case No. 93-10789-WCH in the United States
Bankruptcy Court for the District of Massachusetts (Eastern
Division) (the “Company”), was dismissed pursuant to an order of
that Court, upon the motion of the Company. In accordance with
that order, all of the assets of the Company are to be
distributed to its priority and administrative creditors, with no
assets remaining for distribution to the Company’s shareholders.

Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.

(c) Exhibits

Exhibit 99.1 — Order Granting
Debtor’s Motion to
Dismiss, dated as of
May 7, 1996.

Exhibit 99.2 — Debtor’s Motion to
Dismiss, dated as of
January 18, 1996.

PAGE 2 of 21 PAGES


Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, the counsel to its
bankruptcy estate.


DATE: June 19, 1996 By: Thomas M. Tomlinson
Counsel to Bankruptcy
Estate of Symbolics, Inc.

PAGE 3 of 21 PAGES


Exhibit Description of Exhibit Page

99.1 Order Granting Debtor’s Motion to
Dismiss, dated as of May 7, 1996. 5

99.2 Debtor’s Motion to Dismiss, dated as of 8
January 18, 1996.

PAGE 4 of 21 PAGES


Exhibit 99.1
(Eastern Division)

In re: )
SYMBOLICS, INC., ) Chapter 11
) Case No. 93-10789-WCH
Debtor. )


This matter came on for hearing before this Court on

May 7, 1996 on the Debtor’s Motion to Dismiss (the “Dismissal

Motion”), after due notice to all parties in interest.

Objections to the Dismissal Motion were filed by Catherine D.

Groom, Theresa Dellabella and John Palmer Moving & Storage, Inc.

(collectively, the “Objections”).

Upon consideration of the written submissions and

arguments of the various parties and the pleadings and

proceedings heard to date in this case, and due cause appearing

therefor, this Court hereby finds as follows:

1. Dismissal of this case, on the terms and

conditions set forth below, is in the best interests of the

Debtor, its creditors and its estate. Dismissal will result in

an efficient, expeditious and complete resolution of this

Chapter 11 case since, following the sale of substantially all of

the Debtor’s assets to Princeton Capital Finance Company, all of

the Debtor’s assets have been reduced to cash for final

PAGE 5 of 21 PAGES

distribution pursuant to the terms of this Order. Dismissal of

this case likewise will avoid the costs and delays associated

with the conversion of the Debtor’s case to a case under

Chapter 7 of the Bankruptcy Code, which this Court finds is

unnecessary under the facts and circumstances of this case.

2. No purpose would be served by forcing the

Debtor and other parties in interest to achieve a less favorable

result through a conversion to Chapter 7. To the contrary, it

would result in unnecessary expense, delay and imposition on this

Court and other parties in interest. Moreover, denial of the

Dismissal Motion would unnecessarily further delay payment of all

allowed or allowable administrative and priority unsecured claims

in accordance with applicable law and the terms of this Order.

Accordingly, and for the foregoing reasons, it is


ORDERED, that the Objections be, and they hereby

are, overruled; and it is further

ORDERED, that the Dismissal Motion be, and it hereby

is, allowed. This Court shall enter an order dismissing this

case promptly upon the filing of a statement by counsel to the

Debtor listing payments made by the Debtor of all remaining

assets of its estate, consisting of funds currently held in

escrow, to all allowed or allowable administrative expense and

priority unsecured claims; and it is further

ORDERED, that funds held in escrow at Choate, Hall &

Stewart, which funds constitute all of the Debtor’s known assets,

PAGE 6 of 21 PAGES

shall be distributed first to pay in full holders of allowed or

allowable Section 507(a)(3) and 507(a)(7) priority unsecured

claims and secondly, to holders of allowed administrative expense

claims in accordance with the terms of the Agreed Order Regarding

Fee Applications Of Professionals; and it is further

ORDERED, that the counsel to the Debtor shall cause

copies of all checks evidencing payment in accordance with this

Order to be provided to the Office of the United States Trustee;

and it is further

ORDERED, that the Debtor be, and it hereby is,

authorized without further Order of this Court to execute and

deliver any and all documents and take any and all actions which

it deems necessary or appropriate to effectuate dismissal of this

case in accordance with this Order and the Dismissal Motion.

Entered at Boston, Massachusetts, in said District,

this 7th day of May, 1996, at 10:11 a.m.

/s/ William C. Hillman
William C. Hillman
United States Bankruptcy Judge

PAGE 7 of 21 PAGES


Exhibit 99.2
(Eastern Division)

In re: )
SYMBOLICS, INC., ) Chapter 11
) Case No. 93-10789-WCH
Debtor. )


Symbolics, Inc., the debtor and debtor-in-possession

in this case (the “Debtor”), hereby moves this Court pursuant to

Sections 305(a)(1) and 1112(b) of the Bankruptcy Code, 11 U.S.C.

Sections 101 et seq., for entry of an order dismissing its Chapter 11

case. The Debtor contends that no useful purpose can be served

by maintenance of the case under Chapter 11 or conversion of the

case to Chapter 7 and therefore asserts that such dismissal is in

the best interests of its creditors.

In support of this motion, the Debtor respectfully

represents as follows:


1. The Debtor commenced this case by filing a

voluntary petition under Chapter 11 of the Bankruptcy Code on

January 27, 1993 (the “Petition Date”). No trustee has been

appointed and therefore the Debtor has all of the rights and

duties of a debtor-in-possession pursuant to Sections 1107 and

1108 of the Bankruptcy Code.


2. The Debtor’s primary business consisted of the

manufacture, sale, and servicing of proprietary computer systems.

The Debtor was also engaged in the marketing and servicing of

various software products.

3. On July 27, 1995, this Court authorized and

approved the sale of substantially all of the Debtor’s assets to

Princeton Capital Finance Company, LLC (“Princeton”), following

the receipt of competitive bids by the Court. Prior to the

Princeton sale, the Debtor vigorously pursued reorganization, and

sought an infusion of capital from various sources as a means to

achieving that goal.[FN1] The Debtor also engaged in negotiations

with no fewer than fifteen (15) interested parties for the

possible sale of all or part of its business. The total purchase

price paid by Princeton after allowance for closing adjustments

was approximately $535,215.75, including a deposit in the amount

of $30,000. The Princeton sale was closed on August 9, 1995 (the

“Princeton Closing”). In accordance with an agreement between

the Debtor and CIT Group/Credit Finance, Inc. (“CIT”), the

Debtor’s pre- and post-petition lender, the proceeds of the sale

(net of the deposit paid by Princeton) were deposited with CIT.

The deposit on the purchase price remained in an interest-earning

escrow account held for the benefit of the Debtor’s estate by its



1. The Debtor, the Official Committee of Unsecured Creditors,
and their respective attorneys negotiated and prepared several
proposed plans throughout the course of this case.

PAGE 9 of 21 PAGES


a. Cash

4. As of the Princeton Closing, the Debtor had

approximately $320,000 in outstanding accounts receivable. Of

that amount, the Debtor has collected approximately $120,000

since the Princeton Closing. The Debtor had maintained three

bank accounts at Bank of Boston which had been used to hold the

Debtor’s cash assets, including collected accounts receivable.

In October of 1995, following application of the Princeton sale

proceeds to its debt, CIT deposited substantially all of the

funds owed to the Debtor from the sale to Princeton in the Bank

of Boston accounts.[FN2] On or about November 11, 1995, these

accounts were merged into a single account which currently

contains approximately $44,616. The remainder of the sum that

had been held in this account has been deposited in escrow

accounts with Debtor’s counsel. The deposits in these escrow

accounts with Debtor’s counsel have a current composite balance

of approximately $669,970.11. The Debtor’s counsel also holds a

retainer from the Debtor of approximately $62,000, which has not

been applied. Thus, the Debtor currently has cash available for

the payment of its creditors in the total amount of approximately



2. CIT continues to withhold approximately $6,000 from the
proceeds of the Princeton sale in anticipation of attorneys’ fees
it apparently expects to incur in connection with the Debtor’s
case. The Debtor anticipates that all or substantially all of
this sum will be returned to the estate, voluntarily or

PAGE 10 of 21 PAGES

b. Accounts Receivable

5. The Debtor has collected all of its outstanding

accounts receivable, with the exception of an outstanding account

receivable that was due from the Debtor’s former British

subsidiary, Symbolics, Ltd. The assets of Symbolics, Ltd. were

liquidated subsequent to the Petition Date in a proceeding which

is pending in England. The Debtor is informed and believes that

negligible assets will be distributed from the Symbolics, Ltd.

estate to creditors. Accordingly, the Debtor believes that its

claim against Symbolics, Ltd. is of little, if any, value.

c. Avoidance Actions

6. The Debtor has analyzed all potential avoidance

causes of action and has brought over ten (10) preference

actions. Each of those actions has been concluded and the

proceeds realized from settlements approved by this Court have

been remitted to the Debtor.

7. As a result of the sale of assets to Princeton,

the Debtor has no remaining assets other than the available cash

and accounts receivables set forth in the foregoing paragraphs.

Since the Princeton Closing, the Debtor has not engaged in any

ongoing software or hardware business, but has concentrated its

efforts on the orderly wind-down of its affairs. The only

remaining task for the Debtor is the distribution of its

remaining assets, consisting almost exclusively of cash, to its


PAGE 11 of 21 PAGES


a. Priority Claims

8. This Court set April 29, 1993 as the bar date

for the filing of proofs of claim by all creditors asserting a

claim against the Debtor which arose prior to the Petition Date.

The Debtor has analyzed the proofs of claim filed against it. As

a result of its review, the Debtor believes that claims

(exclusive of administrative claims which are discussed below)

are in excess of $12,000,000. Included within that estimate are

employee claims entitled to priority under Section 507(a) of

the Bankruptcy Code, which aggregate approximately $63,171.58[FN3]

and tax claims entitled to priority under Section 507(a)(7)[FN4] of

the Bankruptcy Code which approximate $231,271.70.[FN5]


3. The Debtor has prepared Symbolics, Incorporated’s
Objection To Overstated Employee Priority Claims Under 11 U.S.C.
Section 502 And Federal Rule of Bankruptcy Procedure 3007.
Depending on the disposition of that objection, these claims could
be reduced to $23,635.99.

4. Since this case was filed prior to October 22, 1994, the
amendments to the Bankruptcy Code enacted by Pub. L. No. 103-394
do not apply to this case.

5. This Court ruled on February 9,1995 that the claim of the
California State Board of Equalization for $315,367.97 was filed
late and will therefore be subordinated and treated as an
unsecured claim. Accordingly, the State of California’s claim is
not included in this estimate.

Furthermore, the Debtor has prepared Symbolics, Incorporated’s
First Omnibus Objection To Priority Tax Claims Under 11 U.S.C.
Section 502 And Federal Rule Of Bankruptcy Procedure 3007. As a
result of that objection, the priority tax claims against the
Debtor’s estate could be reduced to $165,280.89.

PAGE 12 of 21 PAGES

b. Priority Claims Without Merit

9. In addition to those priority claims against

the estate, other creditors have made priority claims totalling

approximately $576,746.69. The Debtor has prepared Symbolics,

Incorporated’s Objection To Certain Secured And Priority Claims

Under 11 U.S.C. Section 502 And Federal Rule Of Bankruptcy Procedure

3007, objecting to the priority status of these claims. The

Debtor believes that this objection will successfully strike all

of these claims.

c. Administrative Claims

10. On information and belief, the Debtor has

timely paid all of its post-petition obligations (trade or

otherwise). There are, however, a variety of administrative

expenses against the Debtor’s estate. The Debtor’s counsel,

Choate, Hall & Stewart, has incurred fees of approximately

$427,835.48 (through January 10, 1996), and is likely to incur

additional fees and expenses as the Debtor’s affairs are wound-

down. At the inception of its Chapter 11 case, the Debtor also

engaged Hutchins, Wheeler & Dittmar to serve as special counsel

with regard to various corporate matters. That firm asserts an

administrative claim in the sum of approximately $60,000. The

Debtor also engaged Yoshida, Croyle & Sokolski, P.C. to prepare

federal and state tax returns and related accounting services,

which has a claim for unpaid professional fees in the sum of

$38,600.87. Finally, counsel to the Creditors Committee, Testa,

PAGE 13 of 21 PAGES

Hurwitz & Thibeault, has incurred fees of $147,941 and is likely

to incur additional fees and expenses as the Debtor’s affairs are wound-down.

In addition to the professionals outlined above, two other creditors assert

administrative claims. First, under a settlement authorized and approved

by this Court on December 16, 1994, Matsco Financial Corporation enjoys

a $5,000 administrative claim. Secondly, the County of Los Angeles has

an administrative claim of $25,811.49 for post-petition property taxes

which were incurred prior to the Princeton Closing. All told, the Debtor

has incurred total administrative costs of $705,188.84.

11. The administrative claimants listed above have

not filed fee applications with this Court. Indeed, during the

three (3) years this case has been pending neither counsel to the

Debtor nor counsel to the Committee have received any payment

from the Debtor’s estate. Because no fee applications have yet

been reviewed by the Court, the Debtor requests that this Court

retain jurisdiction for the limited purpose of reviewing all fee

applications for Debtor’s counsel, counsel for the Creditors’

Committee, and any other entity filing an administrative claim

wishing to be compensated out of the estate.

PAGE 14 of 21 PAGES

d. Secured and Unsecured Creditors

12. Following the sale of the Debtor’s business to

Princeton, the Debtor has no secured creditors.[FN6] The Debtor’s

unsecured creditors have filed claims totalling approximately


13. The Debtor has cash on hand of approximately

$776,586.11 in its bank account and in the escrow accounts

maintained by Choate, Hall & Stewart. The Debtor holds

sufficient cash to pay its administrative claimants in full and

anticipates making a pro rata distribution of any remaining cash

to the Debtor’s prepetition priority creditors in order of their

priority under the Bankruptcy Code.[FN8] No assets are available for

distribution on account of general unsecured claims.[FN9]


6. The Georgia Institute of Technology has filed a secured
proof of claim in the amount of $1,778.04. The Debtor believes
that this claim is unsecured, and has objected to its
classification as a secured claim in Symbolics, Incorporated’s
Objection To Certain Secured And Priority Claims Under 11 U.S.C.
Section 502 And Federal Rule Of Bankruptcy Procedure 3007.

7. This amount includes claims by employees above the $2,000
cap for employee priority claims imposed by Section 507(a)(3).
It also includes a claim for Deutschmarks which was converted to
dollars for calculation purposes using the exchange rate for
September 19, 1995.

8. Accordingly, all employee claims entitled to priority
under Section 507(a)(3) of the Bankruptcy Code would be paid in
full before any pro rata distribution would be made to tax claims
entitled to priority under Section 507(a)(7) of the Bankruptcy

9. Alternatively, the Debtor could make a pro rata
distribution to all allowed administrative and priority claims.

PAGE 15 of 21 PAGES


14. The dismissal of this case will bring an

efficient and complete resolution to this Chapter 11 case.

Dismissal will avoid the costs associated with the preparation of

a plan and disclosure statement and the confirmation process,

which costs the Debtor respectfully submits are unnecessary in

this case as the Debtor proposes a distribution of its cash

consistent with the priorities of the Bankruptcy Code. Moreover,

a liquidating plan would serve no purpose as the funds held by

the Debtor are insufficient to pay any claimants other than

administrative claims and a pro rata distribution to holders of

priority claims and, thus, there would be no impaired class of

creditors entitled to vote with respect to any such plan.

15. Conversion of this case to Chapter 7 would not

be in the best interests of the Debtor’s creditors. Conversion

to Chapter 7 would serve no purpose other than to delay any

distribution and create increased costs of administration,

thereby further depleting the funds available for payment of

existing administrative expense claims and a pro rata

distribution on account of priority unsecured claims.

16. Section 1112(b) of the Bankruptcy Code

authorizes this Court to dismiss or convert a Chapter 11 case

“for cause.” While Section 1112(b) enumerates several grounds

which constitute cause, the list is not exhaustive. See In re

Markhon Ind., 100 B.R. 432, 434 (Bankr. N.D. Ind. 1989). Section

1112(b) requires that this Court exercise its sound discretion in

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determining whether dismissal is in the best interests of

creditors and the estate.

17. Similarly, Section 305(a)(1) of the Bankruptcy

Code allows the court at any time to dismiss a case if the

interests of the creditors and the debtor would be better served

by such dismissal. The foremost considerations in determining

whether dismissal under Section 305(a)(1) is in the best

interests of the debtor and creditors are the efficiency and

economy of administration. See In re Michael S. Starbuck, Inc.,

14 B.R. 134, 135 (Bankr. S.D.N.Y. 1981). Failure to dismiss this

case will only result in a depletion of the assets of the estate

as well as the unnecessary delay of distribution to the creditors

and further imposition on limited judicial resources.

18. The duties of a trustee, as set forth in

Section 704, would be either redundant or irrelevant in this

case. Those duties remaining in the case that could be performed

by a trustee can be more effectively and swiftly performed by the

Debtor, with less cost to its creditors. As the debtor-in-

possession, the Debtor has already reduced the property of the

estate to cash and has investigated its financial affairs in

order to collect on any possible claims. Without limiting the

foregoing, the Debtor has commenced, prosecuted, and settled

preference claims. While the Debtor has not yet filed its

objections to all disputed priority claims, it is in a better

position than a trustee to make such objections, since it has

already investigated the validity of the claims and determined

PAGE 17 of 21 PAGES

which of them may be open to challenge. The Debtor also has

already prepared such objections and intends to file them


19. The remaining duties of a trustee would not

apply to this case. The Debtor no longer has any business that

could be operated or wound up by the trustee. Since the Debtor

is a corporation, there could be no discharge proceeding for the

trustee to participate in. 11 U.S.C. Section 727(a)(1).

20. While a trustee would not be able to perform

any functions that would be helpful to the Debtor’s creditors,

the attendant expenses involved in conversion of this case to

Chapter 7 would draw funds away from the resources from which

those creditors will be paid. The pool of cash that currently

exists to pay creditors cannot grow, as the Debtor no longer has

a business to operate or any other means of generating revenue.

Appointment of a trustee would only increase the total

administrative expenses that would have to be paid from this

existing pool, 11 U.S.C. Sections 330(a), 503(a)(2), further limiting

the pro rata distribution among prepetition priority creditors.

The Debtor’s unsecured creditors would still be unable to recover

on their claims. The procedure involved in the conversion of the

case, election of a trustee, and continuation of the case would

also drain the existing assets of the estate due to the

administrative costs from Debtor’s counsel and the Creditors’

Committee’s counsel necessarily incurred in relation to that


PAGE 18 of 21 PAGES

21. Dismissal of this case is therefore in the best

interests of the Debtor’s creditors. This Motion has been

reviewed by both the United States Trustee overseeing this case

and counsel for the Creditors Committee prior to its submission

to the Court and neither party now opposes dismissal of the case.

Furthermore, case law supports the idea that a debtor should

generally be free to voluntarily dismiss its own case, provided

that its creditors are not harmed thereby. See In re Geller, 74

B.R. 685, 690 (Bankr. E.D. Penn. 1987) (noting that the court

would “grant such a motion [to voluntarily dismiss] in all but

extraordinary situations”); In re Kimball, 19 B.R. 301, 302

(Bankr. D. Maine 1982)(refusing to allow a voluntary dismissal

only because of the “substantial legal prejudice” that creditors

would suffer if the debtor was allowed to file a new petition

which would lead to a more encompassing discharge). The

creditors in this case would not be harmed, and would in fact be

benefitted by dismissal of the case, which would lead to the

maximum possible distribution to the creditors entitled to

distribution under the priority provisions of the Bankruptcy


22. On facts virtually identical to the case at

bar, this Court in In re Edgewood Associates Limited Partnership,

Chapter 11 Case No. 92-19992-WCH, ordered dismissal of the

Chapter 11 case in order to permit the remaining assets of the

estate to be distributed to pay administrative claims in full and

PAGE 19 of 21 PAGES

to make a pro rata distribution to prepetition priority

creditors. While that case involved an original motion to dismiss that

was brought by the United States Trustee and was assented to by the Debtor,

this case comparably involves a motion by the Debtor which is not

opposed by the United States Trustee or the Official Committee of

Unsecured Creditors. In both cases, the best interests of the

creditors in receiving the maximum possible distribution with a

minimum of needless delay can be met by dismissal of the case.

23. If this case is dismissed, the Debtor shall

distribute its remaining cash assets first in payment of allowed

administrative expenses and then any remaining cash assets pro

rata to priority creditors in the same order of priority as

specified in Bankruptcy Code Section 507. The Debtor does not

anticipate that any assets will remain after payment to priority

creditors. Dismissal will, therefore, result in distribution of

the Debtor’s assets consistent with the provisions of the

Bankruptcy Code without the need for the estate to incur the

costs associated with a formal liquidation proceeding and without

the need for any further delay of such distributions.

24. In order to ensure a swift distribution of the

Debtor’s remaining assets, the Debtor will commit to a

distribution date of 60 days after the date that an order is

entered granting dismissal of this case. The Debtor hereby

commits to send checks in accordance with the distribution set

forth herein on or before such distribution date. After the

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distribution date, the Debtor shall furthermore supply this Court

with an affidavit from its counsel, Choate, Hall & Stewart that

such distribution has been made.

WHEREFORE, the Debtor respectfully requests that

this Court grant this Motion to Dismiss and grant the Debtor such

other and further relief as this Court deems just and proper.


By its counsel,

/s/ Douglas R. Gooding
Paul D. Moore, P.C. (bma 02282)
Douglas R. Gooding (bma 04607)
Exchange Place
53 State Street
Boston, Massachusetts 02109
(617) 248-5000

Dated: January 18, 1996

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